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The Canadian dollar held its ground against a broadly firmer greenback on Tuesday, as domestic data showed a third consecutive monthly trade surplus in January and investors awaited jobs data that could provide further direction.

The Canadian dollar settled at C$1.3416 to the greenback, or 74.55 U.S. cents, barely weaker than Monday's close of C$1.3410, or 74.57 U.S. cents.

The currency's strongest level of the session was C$1.3383, while its weakest was C$1.3436, just one pip under the nearly two-month low the loonie touched on Friday.

"From here, there's a lot on the calendar that can still move dollar/Canada to where we see it going, which is the C$1.40 level by Q2," said Eric Theoret, a currency strategist at Scotiabank.

"This week it's the employment picture and then next week the highlight will be the Fed, obviously."

Canadian jobs data is also due on Friday, although the Bank of Canada is broadly seen holding steady on monetary policy despite recent solid economic data.

Canada sends about 75 percent of its exports to the United States and could suffer badly if U.S. President Donald Trump follows through on promises to renegotiate the North American Free Trade Agreement (NAFTA) or if a proposed border adjustment tax is implemented.

The Canadian dollar rose to three-week highs against its broadly weaker U.S. counterpart on Tuesday after stronger-than-expected domestic retail sales data and as prices of oil, a major Canadian export rose. USD/CAD was down 0.55% at 1.3275 by 09.30 ET, the lowest level since February 28. Retail sales jumped 2.2% in January, the largest increase in almost seven years, boosted by auto sales, Statistics Canada said. Economists had expected a 1.1% increase.

Coming after strong wholesales trade and manufacturing figures for January the report reinforced the view that the Canadian economy started 2017 on a strong footing. The loonie, as the Canadian dollar is also known, received an additional boost as oil prices rose on the back of expectations that OPEC-led output cuts, aimed at curbing a global supply glut would be extended past June.

The Canadian dollar remained close to 14-month lows against its U.S. counterpart on Wednesday after the Federal Reserve left the door open to two more U.S. interest rate hikes this year. USD/CAD was steady at 1.3732 by 09.51 ET. On Tuesday, the pair hit highs of 1.3757, the most since February 2016. The loonie has fallen around 2% against the U.S. dollar so far this year, pressured lower by the diverging monetary policy stance between the Federal Reserve and the Bank of Canada. Falling prices for oil, a major Canadian export have also weighed. Another headwind is uncertainty over the future of the North American Free Trade Agreement, which binds Canada, the U.S. plus Mexico. The Fed concluded its two-day policy meeting Wednesday afternoon, giving a positive assessment of the U.S. economy while keeping rates unchanged, as was widely expected. The Fed said it expects the economy to rebound after hitting a soft patch in the first three months of the year, noting that the labor market looks solid and inflation is running close to its target. The hawkish Fed statement indicated that policymakers think the recent weakness in the economy was temporary and that more rate hikes are coming this year. The loonie found some support after data on Thursday showing that Canada's trade deficit narrowed to C$135 million in March as exports surged.

USD/CAD advanced sharply on Wednesday and reached 1-month highs as the greenback strengthened across the board. The US dollar advanced versus most peers, even against commodity currencies and despite the better mood seen in financial markets. USD/CAD reversed yesterday’s losses and hit a peak of 1.2577 during the New York session.

“The broader tone appears somewhat tentative and CAD remains vulnerable in an environment of elevated uncertainty, with a risk profile that tends to deliver violent—albeit short-lived—declines in periods of market volatility”, said the Scotiabank analyst team. “Domestic risk is limited ahead of Thursday’s speech from BoC SDG Wilkins, titled ‘Innovation and Inclusive Growth’. The speech may offer an update on the BoC’s economic outlook, in line with communication plans outlined by Wilkins last November.”

USD/CAD advanced sharply on Wednesday and reached 1-month highs as the greenback strengthened across the board. The US dollar advanced versus most peers, even against commodity currencies and despite the better mood seen in financial markets. USD/CAD reversed yesterday’s losses and hit a peak of 1.2577 during the New York session.

“The broader tone appears somewhat tentative and CAD remains vulnerable in an environment of elevated uncertainty, with a risk profile that tends to deliver violent—albeit short-lived—declines in periods of market volatility”, said the Scotiabank analyst team. “Domestic risk is limited ahead of Thursday’s speech from BoC SDG Wilkins, titled ‘Innovation and Inclusive Growth’. The speech may offer an update on the BoC’s economic outlook, in line with communication plans outlined by Wilkins last November.”

Thank you very much for your analysis! What’s your opinion on the EURUSD right now?